S&P 500 Surges as Fed Rate-Cut Bets Rise: Market Wrap-Up

As I dive into the week’s market activity, one thing is clear: the S&P 500 is rebounding strongly amid mounting bets that the Federal Reserve will cut rates in September.

The latest economic data reinforces this belief, sparking a surge across stocks.

A Strong Finish to the Week

On Friday, about 85% of shares in the S&P 500 rose, helping the index reclaim its 5,600 mark after a previous slide.

Tech stocks made a notable comeback, while smaller firms outperformed their larger counterparts.

However, banks faced a tough start to the US earnings season, with Wells Fargo & Co., JPMorgan Chase & Co., and Citigroup Inc. delivering mixed results that failed to boost industry momentum.

Fed Rate-Cut Bets Fuel Optimism

Despite a weak reading on consumer sentiment, equity traders focused on the prospects of rate cuts, which could ultimately benefit Corporate America.

Producer prices climbed slightly more than forecast, but the categories used to calculate the Fed’s preferred inflation measure, the personal consumption expenditures price index, weren’t as bad.

Mark Haefele at UBS Global Wealth Management commented, “We continue to expect the Fed to join the global rate-cutting cycle in September, with 50 basis points of easing this year.”

Key Market Movers

The S&P 500 is set for its 10th weekly advance in 12 weeks, showcasing the market’s resilience.

• Nasdaq 100 rose about 1%.
• Dow Jones Industrial Average topped 40,000.
• Nvidia Corp. led gains in big tech.
• Tesla Inc. rallied after a previous 8% tumble.

Meanwhile, the Federal Communications Commission is investigating a hack of AT&T Inc. customer data.

Treasury Yields and Currency Movements

Treasury 10-year yields declined by two basis points to 4.19%.

The British pound is trading near its strongest level in a year versus the dollar and the highest in almost two years against the euro.

• Bloomberg Dollar Spot Index fell 0.3%.
• Euro rose 0.3% to $1.0903.
• British pound rose 0.5% to $1.2986.
• Japanese yen rose 0.6% to 157.91 per dollar.

Cryptocurrency and Commodities

Cryptocurrencies showed modest gains:

• Bitcoin rose 0.9% to $58,081.13.
• Ether rose 0.3% to $3,123.94.

In commodities:

• West Texas Intermediate crude fell 0.2% to $82.47 a barrel.
• Spot gold remained little changed.

Corporate Highlights

Several major companies had noteworthy developments:

• Boeing Co.: Notified some 737 Max customers of delivery delays for 2025 and 2026, highlighting ongoing production challenges.
• Amazon.com Inc.: Launched its AI shopping assistant, Rufus, to all US customers after five months of testing.
• Deutsche Lufthansa AG: Cut its profit outlook for the full year, citing higher unit costs and falling ticket prices.
• Novo Nordisk A/S: University of Oxford study linked its drug Ozempic to lower rates of dementia and other mental health benefits.
• Samsung Electronics Co.: Union called for a walkout at one of its advanced AI memory chip plants, shifting tactics after a stalled pay campaign.
• Taiwan Semiconductor Manufacturing Co.: $420 billion equity rally faces a valuation test with upcoming earnings report, where analysts expect a raise in full-year sales forecasts.

Market Sentiment and Future Outlook

“Bulls withstood a barrage of data this week,” said Mark Hackett at Nationwide.

“Market momentum remains relentless. Several important hurdles have been cleared, making earnings the next likely market catalyst.”

Dan Wantrobski at Janney Montgomery Scott weighed in on Thursday’s market rotation, stating, “From a trading perspective, we believe further rotation is possible, as charts still point to the potential for mean reversion.”

Conclusion: A Promising Week for Markets

In summary, the S&P 500’s strong performance this week is a testament to the market’s resilience amid expectations of a Federal Reserve rate cut.

With major companies making strategic moves and economic data reinforcing rate-cut bets, the market is poised for continued momentum.

As an investor, staying informed and adapting to these trends is crucial for making well-informed decisions.

© Photographer: Michael Nagle/Bloomberg